BBN Profile picture
Sep 16, 2020 17 tweets 4 min read Read on X
1/7
I've being increasing my what was a small position in #YU

Not without sizeable covid related risks but the business looks to be on the road to recovery, with plenty of growth opportunity and the price for me is just too cheap.

Trading update due by end of the month.
2/7
Recent acquisition and new energy trading platform, which frees up restricted cash, aren't being valued by the market right now.

Also, low margin contracts that hurt progress these last 2 years, will be down to just £5m in 2021, replaced with high single digit contracts.
3/7
New management in place following the accounts fiasco of 2018. Slap on the wrist from AIM but that for me closes that particular poor chapter.

There are question marks over bad debts from potential Covid bankruptcies but the government small business scheme first payments
4/7
don't start until at least March 2021 and even then there's question marks over how they will be repaid. So at the very least there should be a good buffer for YU through to end of Q2 2021.

The company can achieve plenty of further expansion to compensate by then. .
5/7
and I expect another acquisition or two are on the cards.

The other big question mark is energy hedges vs actual demand, which may cost the company additional fees

This of course would be amplified by further larger UK Covid lockdowns but I don't see that happening.
6/7
Covid moving forward will be about managing the virus and protecting business, that cannot afford anothe rfull lockdown.

So i like the risk/reward is worth it at these sorts of levels.

The BOD own some 56% of shares and with just 16m shares in issue, there is plenty of
7/7
upside on offer, if the company can ride out these near term challenges and continue the good progress made, these last 12 months or so.

As usual I am thinking long term and am taking a somewhat contrarian view, based on my belief that Covid is offering more value right now.
7A
It is also noteworthy that Miton feel the same way, given they increased their stake in #YU, back in August.
7B
Further to earlier posts on risks associated with #YU

Risk - Energy hedges vs actual (Covid affected) demand.

30th July update ;
"Average monthly sales bookings for H1 2020 were up significantly at £6.2m (H1 2019: £3.2m)."
7C
and ;
"Q3 has started with a better than expected month of bookings"

"customer consumption levels have recovered significantly above that of management expectations with Q3 2020 trending towards pre Covid-19 levels."
7D
So things certainly moving in the right direction in terms of consumption and meeting their hedged energy positions.

But then we have the acquisition of Bristol Energy announced 10th August.

Stated as adding ;
7E
"c. 4,000 meter points to Yü Group's current meter portfolio of c. 9,800, an increase of c. 40% to the Group's current meter base."

More importantly ;
"The Acquisition does not include Bristol Energy's forward commodity purchases"
7F
and so allows YU ;
"the ability for Yü Group to hedge commodity volume on lower forward commodity market prices than those assumed in the contracts acquired."

In essence YU has added 40% more customers to its SmartestEnergy hedging facility,
7G
essentially buffering consumption risks highlighted in their 6th April Annual Report, which itself came just 2 weeks after the start of the UK lock down and so at a time, when things were far less certain.

So perhaps said risk is much lower than currently perceived
7H
In addition, this 40% increase in energy demand, will in time, allow YU ;

"enhanced trading capabilities on the increased volumes of energy to forward hedge"

and ;
"generate a lower cost to serve and leverage fixed overheads"
7I
What all of this is leading to, is a YU that is profitable.

H1 2020 indicates a EBITDA loss of £2m, driven in part by Covid. That is still a far better result than H1 2019 (£2.67m), even at reduced revenues (£45m vs £56.6m) and with the above acquisition
7J
synergies still to be factored in.

So again for me moving in the right direction and lacking respect for the effort, with for me more to come on the acquisition front.

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More from @BigBiteNow

Oct 7
1/16
I've been doing some detailed research on #STX and found something important.

With scrips growth now back on track and net pricing expanding the 2 biggest risks I could find were working capital to breakeven and a covenant breach on the SWK financing.
2/
The $5.7m AOP Milestone Monetisation + the $10m Sallyport invoice factoring facility are stated by the broker as delivering them to +cash flows by H2 2025.

The same message is coming from the company although I could imagine a small amount of additional equity in 2025.
3/
The numbers say this would be small (c. $5m) and could well be in the form of a further expansion to the Sallport facility as expanding revenues allow it.

That then leaves the SWK finance covenants.

They are based on quarterly rolling group revenues up until Q2 2025. Image
Read 16 tweets
Apr 4
1/23
I've been studying the #THX Segilola remaining mine life and found some interesting details.

First of all, here is the independently calculated mine plan as it stood in 2021.

Note the mineable ore was calculated at just $1,600 gold.
Image
2/
A total of 501,800 ozs of payable gold was expected at 97% recovery from 518,000 oz of contained gold.

To date, recoveries, since operations began, have been averaging c. 94.4%.

At that rate, Segilola will deliver 489,000 oz over its current mine life. Image
3/
Up to the end of 2023, the mine has produced 192,503 oz and sold 179,138 oz.

This means 13,365 oz sit in inventory as of 1st Jan 2024 with a current value at $2,100/oz of c. $28m.

What this also means is that Segilola still has 296,497 oz of gold to produce.
Read 24 tweets
Jul 22, 2022
1/16
It's difficult to call this market but my view is that assuming no more operational glitches #TGR now steadily re-rates as the operations sign off the various stages to 30ktpa.
2/
Front-end valuations should depend on where graphite prices go but as Syrah demonstrated yesterday (graphite fines not large flake) orders are buoyant.

Forward orders there running at 90,000 tons which are 50% of their current yearly output. So substantial.
3/
Note also Syrah cannot produce for less than FOB C1 $543/t even at 15,000 tons per month output and that's fines.

It is clear after last night's presentation that TGR C1 costs have also risen but this is to be expected in this current market.
Read 16 tweets
Jul 21, 2022
1/12
Here are Verde Agritech's expected sales targets for 2022 which were revised in May and offer a significant read across to #HMI and what it can achieve this year and also.
2/
Note the 43% jump in forecast 2022 sales but that all of this rise is due to significant increases in Q3 and Q4 sales projections.

In fact, Q1/Q2 should actually deliver slightly less than was forecast originally.
3/
This forecast was adjusted on 3rd May and the Q3/Q4 forecasts are based on "committed orders and projected orders." Just like with HMI.

Verde sees itself delivering c. 62% more product in Q3 than originally projected on 10th Jan 2022. So inside 4 months.
Read 12 tweets
Jul 20, 2022
1/9
In a previous #HMI thread, I highlighted that the $600k write-down in the FY2021 accounts meant that trade debtors (so effectively trade receivables) almost doubled between YE 2020 and YE 2021.

$924k vs $1.824m
2/
Due to the way HMI's business cycle runs this is a theme that compounds as sales expand along with prices.

Meaning that if investors simply concentrate on cash on hand then they are misunderstanding how the business operates.
3/
This is can be proven by simply reviewing the Verde Agritech quarterly accounts once more.

For revenues Verde count the full price including freight which indicates that they are responsible for this. Unlike HMI which sells at the gate.
Read 9 tweets
Jul 20, 2022
1/18
I've been running an extensive exercise on Verde Agritech also a relatively new but expanding fertiliser producer based just c. 70km from #HMI in Minas Gervais in Brazil. The results to date are rather fascinating and certainly worthy of review.
2/
Verde is a TSX-listed producer with a current plant capacity nearly double the size of HMI (0.6Mtpy) but with a phase 2 expansion due to come online in 2023 which would take output to 2.4Mtpy.

So a much bigger operation to come and soon.
3/
Those that remember my 5th July numbers on #HMI sales prices will perhaps remember that they demonstrated a $53.20/t average sale price for 2021.

At the average achieved AUD/BRL for 2021 of 4.054, this equated to an average price of BRL216.

Read 18 tweets

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